Why Every Contractor Should Do a Year-End Financial Review

Before tax season arrives, contractors should carve out some time to review their company's financial health. This year-end review allows them to evaluate their profits, manage expenses, prepare for tax season, and identify ways to strengthen their cash flow and bonding capacity for the coming year!

Why Year-End Reviews Matter for Contractors

Contractors' finances play a crucial role in their business stability, financing eligibility, and bonding capacity. As an insurance agent, you can support your contractor clients by encouraging them to conduct a year-end review. 

A structured year-end review gives them the chance to:

• Review their income and revenue streams
• Evaluate their expenses across projects
• Analyze their profit margins
• Identify areas for improvement
• Prepare clean records for their certified public accountant (CPA)
• Gather the documentation they’ll need for upcoming bond and insurance renewals

By handling these tasks ahead of tax season, contractors can make their CPA’s job easier and spend less time searching for missing paperwork in March.

Organize Financial Records Early

One of the most time-consuming parts of tax season is gathering and reconciling financial documents. Encourage your clients to simplify this year’s tax season by getting a head start. 

They should start by pulling together their:

• Invoices and receipts
• Subcontractor agreements and payments
• Bank and credit card statements
• Equipment purchase records
• Fuel, materials, and rental expenses

Additionally, make sure they categorize all job costs properly and update any outstanding W-9s or 1099s before filing deadlines.

Evaluate Project Profitability and WIP Reports

A year-end review isn’t just about tax preparation. It’s also the perfect time for contractors to analyze their past jobs and assess what’s really driving their business success, based on their:

• Completed project margins
• Work-in-progress (WIP) reports
• Over/under-billings
• Change order performance
• Comparison of estimated vs. actual costs

Prompt your clients to evaluate which projects generate the most profits, which clients or job types may be draining your resources, and which subcontractors or suppliers consistently deliver or fall short of their expectations. This analysis can help them plan smarter for future projects and present stronger financials during the coming year’s bonding and financing applications.

Read More: Why Private Construction Projects Pose Unique Bonding Challenges

Review Cash Flow and Debt Management

Even with strong profits on paper, cash flow can still make or break a contractor’s business success. Thus, urge your clients to pay close attention to the following details during their year-end review:

• Current cash position
• Outstanding liabilities
• Short-term debts to pay down before December 31 to improve liquidity
• Equipment financing arrangements
• Available credit lines and whether they need adjustment

By improving their cash position now, your contractor clients can strengthen their financial profile and qualify for higher bonding capacities in the coming year. If their business faces seasonal fluctuations, they should also plan ahead for slower months to prevent cash flow gaps before they arise. 

Meet With a CPA Before the Rush

January through April is a CPA’s busiest season. By scheduling meetings before the rush, your clients are more likely to receive attentive, personalized guidance from their accountants.

Remind your clients to ask their accountant about the following topics during their meeting:

• Potential deductions
• Depreciation schedules
• Large purchases they’re considering
• Any changes in their business structure or ownership
• Employee vs. subcontractor classifications
• Estimated tax payments

Your clients can also ask their accountant for suggestions to strengthen their finances. Even minor improvements may help them qualify for higher bonding limits and more affordable financing in the future. 

Read More: How Trust in a Surety Partner Impacts Business Growth

Set Financial Goals for the New Year

A year-end review can reveal important insights about a contractor’s strengths, weaknesses, and opportunities. As a result, you should urge your clients to use these insights to inform their business goals for 2026. 

For example, they can set new:

• Revenue and profit targets
• Cash flow benchmarks
• Strategic hiring or subcontracting objectives
• Equipment, software, or operational upgrade initiatives

After that, remind them to schedule quarterly check-ins to track their progress. By taking a proactive approach, contractors can bid smarter, run leaner, and grow faster in 2026. 

Read More: 6 Essential Bonds To Support Contractors' Business Growth

How UCS Helps Contractors Stay Financially Prepared

Strong financials and clean year-end reports play a major role in determining a contractor’s bonding capacity, which ultimately influences the size and number of projects they can take on. 

As an insurance agent, you can motivate your clients to complete their year-end reviews in time to improve their financial profile and qualify for higher bonding limits in 2026. 

You can also match them with flexible bonding solutions by partnering with United Casualty & Surety (UCS). As a surety-only agency, we regularly partner with insurance agents to support their contractors’ success. We can help your clients position themselves for more profitable project opportunities by:

• Highlighting what underwriters look for during bond renewals
• Helping them understand how year-end reports affect bonding limits
• Offering expert guidance to prepare them for underwriting
• Streamlining the bond application to prevent unnecessary delays 

Ready to get ahead this tax season? Contact UCS today!

Key Takeaways

• A year-end financial review helps contractors stay organized, reduce tax-season stress, and plan smarter for the year ahead. 
• Clean books can streamline contractors’ bonding, insurance, and financing applications and renewals.
• Meeting with a CPA before January can improve contractors’ tax strategy and help them beat the stressful tax season rush. 

Sources:

Forbes. Five Ways To Maintain Great Culture In A Seasonal Business.

https://www.forbes.com/councils/forbesfinancecouncil/2019/05/30/five-ways-to-maintain-great-culture-in-a-seasonal-business/

Contractor Year-End Review: Frequently Asked Questions

Q: What is a year-end financial review for contractors?

A: A year-end financial review gives contractors the chance to carefully analyze their company’s books, job costs, and overall performance. They should also use this time to reconcile bank statements, verify income and expenses, assess their profitability, and review any outstanding invoices or liabilities. With a clear snapshot of their finances, they can avoid untimely surprises during tax season. 

Q: Why is it important to complete a financial review before tax season?

A: Conducting a financial review before tax season gives contractors time to correct errors, optimize potential deductions, and gather detailed documentation for their CPA. In turn, they can make sure their balance sheets and income statements accurately reflect their business's performance and set themselves up for smoother tax filings.

Q: What should contractors include in a year-end review?

A: During a year-end review, contractors should examine their job costs, profit-and-loss statements, WIP reports, balance sheets, and cash flow. They should also reconcile their accounts, ensure accurate expenses and payroll entries, and confirm that their billing lines up with actual work completed in the field.

Q: How does a year-end financial review benefit bonding and business growth?

A: Along with improving a contractor’s tax readiness, a year-end review can optimize their bonding capacity by ensuring they have clean, accurate financial documents ready to share with surety companies. Understanding their financial position can also help contractors plan for growth, improve their cash flow management, and bid on larger projects with confidence. 

Q: When should contractors start their year-end review?
A: Contractors should ideally begin their year-end financial review in late November or early December. Starting early gives them time to work with their CPA before their schedule fills up and address any issues before the fiscal year officially closes.

Beginning this review ahead of the holiday rush also gives contractors more breathing room to organize records, verify job costs, make strategic financial decisions, and correct any discrepancies while there's still time to act.

By completing this review before year-end, contractors can enter the new year with clean books and a stronger financial foundation for securing bonding, financing, and new project opportunities.